I keep saying over and over again, that Portugal is at the brink of collapse. Our ignorant governants of course all they do is blame the evil speculators, instead of doing their job, which is to balance the freaking finances.

PSI-20 today crashed -5.4%, while Greece declined 7/8% if I am not mistaken...

This was last night's graph of the Portuguese index:

I said yesterday, there was no freakin' reason to want to be invested in PSI-20, and I guess it was for a good reason. Today we closed at around 7,000 points, which pretty much is the bottom of the previous graph...

As for Greece, remember the graph I posted last week with a Head and Shoulders pattern... now the index stands like this:

Monday, April 26, 2010

For my fellow portuguese investors it seems the PSI-20 is not looking for a rest at all.

After a sell signal last week, it has already gone down 6.7%, and as far I can see there is no reason at all to be investing in PSI yet.

EDP-Renováveis which is the third biggest company in terms of renewable energies in the world, is not attractive at all at this moment and I can't understand how so many portuguese investors love to buy a falling knife...

I don't know when will this correction on PSI-20 will end, hey, it may well be the new leg of a bear market.

And just for curiosity, if past holds any truth, PSI-20 index, since its' creation has been an excellent prognosticator of what is to come to the world indexes. Usually the portuguese index breaks first than the more renown indexes such as S&P 500, etc.

After last week, when Greece activated financial help, bonds decreased from 8.8% yield to low 8% which is huge move.

It was to be expected of course. The same way it was to be expected that in the bigger picture that would have NO IMPACT at all. After that decline, the trend just resumed and the 10 Year Bonds are now trading at 9.4% while the 2 Year Bonds at 13%...

Today's Greek bond chart.

The Euro on the other hand, pretty much since we at this website advocated for a large move on the dollar, it has gone down from 1.50'ish and is now trading in the low 1.30'ish.

Friday, April 23, 2010

April 23 (Bloomberg) -- Greece called for activation of a financial lifeline of as much as 45 billion euros ($60 billion) in an unprecedented test of the euro’s stability and European political cohesion.

The appeal for help from the European Union and International Monetary Fund follows a surge in borrowing costs to what Greek Prime Minister George Papandreou called unsustainable levels that undermine efforts to cut a budget deficit of more than four times the EU limit. Greek bonds rebounded and the euro rose.

“It is a matter of national need to ask officially” for the activation of the EU-led aid mechanism, Papandreou said in a televised address from the Greek island of Kastelorizo.

With national debt of almost 300 billion euros and bond yields exceeding junk-rated nations such as the Philippines, Greece faces a fiscal mess that threatened to spread to Spain and Portugal, forcing the EU to set up a standby aid facility. At stake is the future of the euro 11 years after its creators gave the European Central Bank responsibility for interest rates while leaving fiscal policy in national capitals.

The request came one day after the yield on the country’s benchmark two-year note topped 11 percent, nearing that of Pakistan, and Moody’s Investors Service lowered Greece’s creditworthiness by one notch to A3, saying it was considering a further cut to junk.

After Papandreou’s announcement, the 2-year yield, which yesterday rose above 10 percent, declined 82 basis points to 9.481 percent. The euro snapped six days of declines to rise 0.1 percent to $1.3309.

Yup. Like I said a few months ago, it was only a matter of time for Greece to ask for a bailout. Today was it.

Thursday, April 22, 2010

The 2 year notes for Greece have hit 10% today. And Moody's cut Greece's debt rating as well.

And the yield curve of the greek bonds are as follow:

So we are now in the presence of an inverted yield curve from the 2YR maturity onward.

In other words, a default is expected in the long term, but not without a bailout first in the short term.

Edit: I had seen this pattern develop a long time ago, but now is even more noticeable the perfect breakout of the neckline followed by a test of the neckline which failed to break, making this H&S pattern a valid one, with target at around 1175 points on the Greek index.

This means a decline of 40'ish % still to follow on the Greek exchange ! To be honest this H&S is super perfect and a beauty to be seen.

I hear every so often lately people asking me: "Should I buy Greek bonds?" , "They're cheap..." , "Default is unlikely..." etc etc.

The truth is, more than a year ago I said the next crisis would become evident on sovereign debt. At the time, you couldn't find anything on the media. 4-5 months ago, Greece wasn't even a topic of conversation. Once the debt problems escalated to the public knowledge the greek Prime-Minister came to public staying that Greece didn't have any problems. They had it under control and wouldn't need help from either EU or IMF.

4 months later he is quiet as a mouse. This after a scandal of crooked accounts by the Finances department of the country in order to hide the real numbers from EU.

Now Greece looks to be the hot topic for every John Smith around the world, like suddenly they are top experts. I see a lot of retail public saying they want to buy Greek bonds. This has been on the past 2 weeks where yields at the time were under 7%, and of course we know how the public is wrong most of the times.

Yields don't stop escalating. They are now on the 8.6% area... An intervention will have to take place sometime, probably it will be during the weekend in a concerted effort by the EU and IMF most likely to bailout Greece this weekend.

Portugal, oh well, we're pretty much in the same boat no matter what people in newspaper say, whatever the portuguese Finance Minister says - the guy is either lying or is ignorant - if this keeps going we Portuguese will have to endure some real problems ahead. The PEC is a joke, there were no significant cuts announced, just higher revenue coming from higher taxes (which will strangulate the economy even more) and by the sale of assets, which as most of you know is not recurrent thing, so once the jewels are out, what are they gonna do?

Wednesday, April 21, 2010

Today again, with no surprise, yields breached a new high, making a new record.

Of course, media blames the damn speculators. What speculators? The speculators that are afraid they won't have their money back? If Greece doesn't want to be exposed to the so called "evil speculators" and the high yields they have a pretty good way to do so: stop borrowing money ! Just the same way a family when filled with debt they have only one solution. First, stop borrowing money after money with the only purpose of paying previous debts - this just makes you dig a deeper hole - and cut the expenses to balance the solvency problem that will come after, once you fall back into reality and see that you cannot maintain the old standards, since those standards were reached from money it wasn't theirs in the first place !

Why Greece would be any different than what the market is for any other kind of market agent, just like any company or family?

Yields today at 8.33%. It's a matter of time for IMF or EU to intervene...

Make your contribution... One jerrycan provides a family of four up to 3-5 years of pure water with no need for replacement. It is a much more efficient way that our dollars that may go to charity are put to work.

If you know of institutions that provide such help for areas where potable water is a problem, let them know of this little product. It can really save some lives....

Wednesday, April 7, 2010

Today, the yields have reached a new high and it will become harder and harder for Greece to withstand the pressure of their debt.

As I said on previous occasions the market is telling that sooner or later Greece will default on its debt. And unlike most economists or Greek politicians blaming speculators for the plunge of their government bonds, I don't like to go against the market collective will.

Even last week, when Greece auctioned 1 Billion, they failed to issue all the debt since the demand stood only at 400 Million or so.

Tuesday, April 6, 2010

Well it seems the loonie has reached parity today. Incredible. 1 canadian dollar is now worth... well... 1 american dollar.

The Canadian dollar is actually on of the few currencies worldwide to have strengthen lately, since the dollar has been in a rally mode pretty much since November/December.

But take a closer look though. If I would care to take a guess, I'd say the bearishness on this pair is about to end with what seems 5 waves already on this last down move. From there on, it is my opinion that the USD will start to strengthen just as much as it has been happening with other currencies. USDCAD may be a little late for the party, but is sure to make a great entrance I bet.

Apple launched yesterday their iPad, which is full of hype. Just another fancy product that lacks in quality and utility.

If you're one to believe in mass media psychology maybe Apple is reaching it's pinnacle.

The cover of TIMES magazine serves very well for contrarian signals, once a subject makes the cover it usually means it's the pinnacle of that subject.

Hitler made cover in 1939, and Estaline also made cover before his demise.

In 1999 the cover featured Jeff Bezos, Amazon's CEO which was the exact top both for the stock and internet bubble.

2005 the cover was the real estate investor, and we all know how that ended.

After last year's Fall covering Ben Bernanke which I believe to be also his pinnacle, this month's cover:

Recommended Books II

EWI Club FAQ

Disclaimer: The information provided on this website, while timely, colorful, and accurate, is not to be taken as financial, legal, tax, psychological or any type of advise. The purpose of this website is to track the progressions of human herd psychology as it is reflected through several financial markets. Any commentary on this page, however useful it may be, is used for illustration, and to inspire thought provoking discussion, and not to be taken as specific trade recommendations. We are not endorsing any site or service, nor are we promoting choice examples as real-life trades. If it sounds sarcastic, it probably is and if it offends you, just don't read it. There are tremendous inherent risks in attempting to trade any market using any vehicle, particularly if it is leverage. Please contact your broker to explain all risks involved in the vehicle you will be trading and any questions you may have.